We question the ‘central generation paradigm’. Close examination of past power industry options and choices suggests that load growth can be met with just over half the fossil fuel and pollution associated with conventional central generation. We make these points:
- the power industry has not deployed optimal technology over the past 30 years
- the universally accepted central generation paradigm prevents optimal energy decisions
- decentralized generation (DG), using the same technologies used by remote central generation, significantly improves every key outcome from power generation
- meeting global load growth with decentralized energy can save $5 trillion of capital, lower the cost of incremental power by 35%-40% and reduce carbon dioxide emissions by 50% versus the IEA central generation dominated reference case.
A brief history of electricity generation
Figure 2 shows that US net electricity generating efficiency peaked in about 1910, when nearly all generation was located near users and recycled waste heat. That efficiency dropped to 33% over the next 50 years as the power industry moved to electricity-only central generation and has not improved in four decades. However, technology improved, enabling the conversion of fuel to electricity to rise from 7% at commercial inception to 33% by 1960. The best electricity-only technology now converts over 50% of the fuel to power, but the industry average efficiency has not improved in 43 years. No other industry wastes two thirds of its raw material; no other industry has stagnant efficiency; no other industry gets less productivity per unit output in 2004 than it did in 1904.
Early generating technology converted 7%-20% of the fuel to electricity, making electricity-only production quite expensive. To reduce fuel costs, energy entrepreneurs, including Thomas Edison, built generating plants near thermal users and recycled waste heat, increasing net electrical efficiency to as much as 75%. A second wave of technical progress post World War II drove electricity-only efficiencies to 33%, after distribution losses and increased individual plant size to between 500 and 1000 MW. Central or remote generation of electricity only, while still wasting two-thirds of the input energy, became the standard. Buttressed by monopoly protection, utilities fought competing on-site generation and, by 1970, replaced all but 3%-4% of local generation, ending waste heat recycling. Government regulations, developed over the first 90 years of commercial electricity, institutionalized central generation.
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In spite of this, only 6% of US households currently have an on-site generator, most of which are portable models that are exclusively used during power outages and need to be manually started. However, a growing number of homeowners are purchasing permanently mounted, automatic systems, says Primen, and nearly one in six households surveyed has expressed interest in an on-site power system that would produce the majority of their electricity requirements.